THE GREAT DEPRESSION AND THE NEW DEAL

[Pages:12]THE GREAT DEPRESSION AND THE NEW DEAL

I. Franklin D. Roosevelt A. Background 1. Born at family estate at Hyde Park, New York; raised in a wealthy family 2. Undersecretary of the Navy during WWI -- responsible for increased naval strength 3. Vice Presidential nominee for Democratic Party in 1920 (James Cox lost election) 4. Struck by polio in 1921 a. Confined to a wheelchair for the rest of his life b. disease strengthened his will, patience, tolerance and compassion. 5. Elected governor of NY in 1928 and 1930 a. Depression programs for the unemployed, public works, aid to farmers, and conservation attracted national attention. b. Dubbed "traitor to his class" by the rich c. Spoke frequently of his concern for the plight of the "forgotten man." 6. Politically suave and conciliatory a. The premier orator of his generation b. Really a conservative in many ways: fiscally frugal, not anti-big business B. Eleanor Roosevelt 1. Niece of Theodore Roosevelt 2. Pushed FDR to maintain political career; vigorously campaigning on his behalf. 3. Major leader of the female wing of the Democratic party in 1920s and early 30s. 4. Became the "conscience of the New Deal" a. Published a syndicated newspaper column b. Lobbied extensively for her husband. 5. Championed causes for women, children, the impoverished, and African Americans 6. Most active first lady in American History

II. Election of 1932 A. Roosevelt -- Democratic candidate (chosen over Al Smith) 1. "I pledge you, I pledge myself to a new deal for the American people." 2. Somewhat vague and contradictory during campaign a. Promised balanced budget & 25% cuts in gov't spending -- Criticized present deficits. b. Promised gov't aid for the unemployed c. Advocated repeal of Prohibition B. Hoover -- Republican candidate 1. Platform: Higher tariffs and maintenance of the gold standard. -- Predicted repeal of Hawley-Smoot tariff would be economically devastating. 2. Reaffirmed faith in American free enterprise and individual initiative 3. Defensive in tone contrasted with Roosevelt's optimism. C. Roosevelt defeats Hoover 1. 472 to 59 in the electoral count; Hoover carried only 6 states. 2. 22,809,638 to 15,758,901 in popular vote 3. Blacks, traditionally loyal to Republican party of Lincoln, shifted to Democrats -- Became vital element in the Democratic party. D. "Lame duck" period 1. Hoover tried unsuccessfully to bind Roosevelt to an anti-inflationary policy that would

have jeopardized future New Deal programs. 2. Hoover managed to arrange two meetings with FDR but Roosevelt refused to

carry out Hoover's plans or suggestions. 3. Meanwhile, the American economy came to a virtual halt. 4. Twenty-first Amendment passed by Congress in February, 1933

a. Repeal of prohibition b. March -- new Congress legalized light beer c. Amendment ratified by the states and took effect in December, 1933 E. Twentieth Amendment (adopted in 1933) 1. Presidential, vice presidential, and congressional terms begin in January 2. FDR first president to begin new presidential term on January 20th, 1936 -- Congress assumed its offices on January 3rd.

III. Effects of the Great Depression by 1932 A. 25%-33% unemployment B. About 25% of banks failed C. 25% of farmers lost their farms D. Large numbers of businesses failed E. Loss of self-worth among millions of Americans

IV. The New Deal "Let me assert my firm belief that the only thing we have to fear is fear itself." -- Inaugural address

A. FDR's administration 1. "Brain Trust": FDR selected experts for his "inner circle" rather than the typical politicians or businessmen. 2. Notable cabinet members and members of Roosevelt's "inncer circle" a. Cordell Hull -- Secretary of State b. Frances Perkins became the first woman cabinet member; sec. of labor c. Harold L. Ickes -- sec. of interior; headed PWA d. Harry Hopkins -- head of FERA and later, WPA e. Eleanor Roosevelt

B. First "Hundred Days" (March 9-June16, 1933) 1. FDR did not have a developed plan when he took office. a. Intended to experiment and find out what worked. b. As a result, many programs overlapped or contradicted others. c. Sought practical solutions to practical problems. d. Used the fireside chats as a means to communicate with the American people. 2. Plan: Relief, Recovery, and Reform a. Short-range goals were relief and immediate recovery, esp. within 1st 2 years b. Long-range goals were permanent recovery and reform of current abuses, espeically those that had produced the Great Depression c. Embraced such progressive ideas as unemployment insurance, old-age insurance, minimum-wage regulations, conservation and development of natural resources, and restrictions on child labor. d. Designed to deal with immediate emergencies, some measures of which were

derived from progressive ideas. 3. Unprecedented passage of legislation in U.S. history

a. Congress eager to cooperate with FDR due to his strong mandate b. Gave the president extraordinary blank-check powers c. Some legislation delegated legislative authority to the chief executive. d. 1st 100 Days legislation has left a lasting mark on the nation 4. 1933-1935 programs now called First New Deal a. EBRA, Glass-Steagall Act, Truth-in-Securities Act, SEC, HOLC, FHA, FERA, CCC,

PWA, AAA, NIRA (NRA), TVA b. 1935-1938 programs referred to as Second New Deal (see below) C. The Banking Crisis 1. Crisis a. 5,190 banks failed in 1933 bringing total number to 10,951 b. Banks in 38 states were closed by state governments. c. Remainder open for limited operations only. 2. FDR declared national "banking holiday" between March 6-10 a. Only banks who were solvent could reopen (the majority did) b. Aimed to restore faith in the nation's banking industry c. Government endorsement of banks would encourage people's trust 3. Took nation off the gold standard (March 6, 1933) a. Ordered all private holdings of gold to be surrendered to the Treasury in

exchange of paper currency. b. Congress responded by canceling the gold-payment clause in all contracts

and authorizing repayment in paper money -- "managed currency" c. In 1934, reduced value of the gold content of the dollar to 50.06 cents

i. Value of dollar set at $35 per ounce of gold, 59% of its former value. ii. FDR wanted to stimulate business through controlled inflation iii. New purchasing power not significantly changed except with

the unfavorable purchase of foreign goods. d. Forbade the export of gold or redemption of currency in gold 4. Emergency Banking Relief Act of 1933 (March 9, 1933) a. Gave president (Treasury) power to open sound banks after ten days and to merge

or liquidate unsound ones. b. Provided additional funds for banks from the RFC and the Federal Reserve c. Forbade the hoarding of gold. 5. March 12, first of his 30 "Fireside Chats", listened to by 35 million Americans, gave assurances that it was now safer to keep money in the reopened banks than "under the mattress." -- Confidence in the nation's banking was restored as deposits outpaced withdrawals. 6. Home Owner's Loan Corporation (HOLC) -- June 13, 1933 a. Designed to refinance mortgages on about 1 million nonfarm homes. b. Banks were bailed out as a result as many foreclosures were prevented. c. Eventually lent over 3 billion dollars to over one million home owners. d. Middle-class loyalties shifted to the Democratic party. 7. Glass-Steagall Banking Reform Act (Banking Act of 1933) -- June 16, 1933 a. Provided for the Federal Deposit Insurance Corporation (FDIC)

-- Individual deposits of up to $5,000 were federally insured b. Separated commercial banking from the more speculative activity of

investment banking. D. Regulation of Banks and Big Business

1. "Truth in Securities Act" (Federal Securities Act) -- May, 1933 -- Required promoters to transmit to the investor sworn information regarding the soundness of their stocks and bonds.

2. Securities and Exchange Commission (SEC) -- June 6, 1934 -- Designed to protect the public against fraud, deception, and inside manipulation. The stock market would operate more efficiently.

3. Public Utility Holding Company Act of 1935 (August 26) -- 2nd New Deal a. Reduced the possibilities of a business buying up other businesses with a minimum amount of capital. b. Empowered Securities and Exchange Commission to restrict public holding companies to one natural region and to eliminate duplicate holding companies.

4. Banking Act of 1935 created a strong central Board of Governors of the Federal Reserve System with broad powers over the operations of the regional banks.

E. Relief and Unemployment programs of the Hundred Days 1. Civilian Conservation Corps (CCC) -- March 31, 1933 a. Most popular of New Deal programs b. Provided for the employment of 2.75 million young men (18-24) in fresh-air government camps to keep them out of trouble during the 1930s.. i. Reforestation, firefighting, flood control, swamp drainage, and further developing national parks. ii. Under direction of the War Department c. Workers ate together in mess halls, lived in barracks, and followed a strict schedule -- Some immigrants fearful that their sons being trained for the army. d. Mot of monthly payment made to the family of each member.. e. Some criticized it as being too militaristic in nature 2. Federal Emergency Relief Administration (FERA) a. Created by Federal Emergency Relief Act (May 12, 1933) b. Headed by Harry Hopkins c. Ultimately granted $3 billion to states for direct dole payments or preferably for wages on work projects. d. Later, Hopkins felt that giving people $ broke down their self-respect and and will to work; sought relief programs to put people back to work. e. Civil Works Administration (CWA) (branch of the FERA) -- Nov. 1933 i. 4 million unemployed received jobs in mostly make-work tasks -"boon-doggling" -- such as raking leaves, sweeping streets and digging ditches. ii. Widely criticized and terminated in April 1934. 3. Public Works Administration (PWA) -- Created by NIRA in 1933 a. Headed by Harold L. Ickes b. Allocated over $4 billion to state and local governments to provide jobs on 34,000 public projects such as building schools and dams, refurbishing gov't buildings,

planning

sewage systems, improving highways, and generally modernizing the nation. c. Problem: Ickes did not spend the money quickly enough; millions remained out of work. 4. Works Progress Administration (WPA) -- May, 1935 (2nd New Deal) a. Created on the heels of unrest and criticism from such figures as

Father Charles Coughlin, Huey Long, and Dr. Francis Townsend. b. Employed nearly 9 million people on public projects such as buildings,

bridges, and hard-surfaced roads, airports, schools, hospitals. c. Total cost: $11.4 BILLION; eventually employed 40% of nation's workers. d. Workers employed for 3-hours per week at pay double the relief payment but

less than private employment. e. Federal Arts Project -- Agencies of the WPA also found part-time occupations

for high-school and college students and for actors, musicians, and writers. 5. National Youth Administration (NYA) -- June, 1935

a. Created as part of the WPA b. Provided part-time jobs for high school and college students to enable them

to stay in school, and to help young adults not in school to find jobs. F. Agricultural Programs of the Hundred Days

1. Agricultural Adjustment Administration (AAA) -- May 12, 1933 a. Headed by George Peek b. Attempted to eliminate price-depressing surpluses by paying growers to reduce their crop acreage -- subsidies. i. Goal: Prices equal to those of 1909-1914 period. ii. Subsidy money came from a tax on the processing of the commodities. -- Processing tax later ruled unconstitutional. c. Much of the cotton crop for 1933 was plowed under. d. Several million pigs were purchased and slaughtered. Much meat was either distributed to people on relief or used for fertilizer. e. Criticized for destruction of food at a time when thousands were hungry. -- Much of criticism unwarranted f. Farm income was increased but tenants and sharecroppers were hurt when owners took land out of cultivation, thus removing the tenants but retaining the subsidies. g. Eventually killed in the Supreme Court case Butler vs. U.S. -- FDR resolved to continue program by creating 50 small AAAs in states. h. Commodity Credit Corporation est. in Oct. 1933 to make loans to corn and cotton farmers against their crops so that they could hold onto them for higher prices (similar to Populist idea of a subtreasury plan)

2. Federal Farm Loan Act a. Allocated millions of dollars to help farmers meet their mortgages. b. Consolidated all farm credit programs into the Farm Credit Admin.

3. Addressing the Dust Bowl refugees a. Late 1933, drought struck states in the trans-Mississippi Great Plains -- Millions of tons of powdery top soil were blown as far as Boston b. In five years, 350,000 Oklahomans and Arkansans -- "Okies" and "Arkies" migrated to southern California. c. Frasier-Lemke Farm Bankruptcy Act of 1934

i. Allowed farmers to defer foreclosure on their land while they obtained new financing.

ii. Helped them to recover property already lost through easy financing. d. Resettlement Administration (RA) May 1935

i. Relocated destitute families to new rural homestead communities or suburban towns. ii. Set up by FDR to move devastated farmers to better land e. CCC employed many who planted more than 200 million new trees f. Grapes of Wrath by John Steinbeck educated many on the crisis. 4. Rural Electrification Administration (REA) -- May 1935 -- Provided loans and WPA labor to electric cooperatives to build lines into rural areas not served by private companies. G. Industry and Labor 1. National Industrial Recovery Administration (NIRA) -- June 16, 1933) a. Most complex and far reaching of New Deal programs was designed to prevent extreme competition, labor-management disputes, & over- production -- FDR and advisors believed nation's economy had reached its growth limit

and that laissez faire was damaging to the mature American economy. (This would prove incorrect as the US economy burgeoned in later decades.) b. Board composed of labor leaders and industrial leaders in over two hundred individual industries were to work out codes of "fair competition". i. Maximum work hours: spread employment out among more people. ii. Minimum wages were established. iii. Minimum prices set (to avoid cutthroat competition) iv. Production limits and quotas instituted (to keep prices higher) c. Antitrust laws temporarily suspended for two years. -- Some leftist critics believe that FDR sought to merely preserve the capitalist system where the real winners were the industrialists. d. Section 7a i. Workers formally guaranteed the right to organize and bargain collectively through representatives of their own choosing. ii. "yellow dog", or antiunion contract was forbidden. e. Certain safeguarding restrictions were placed on the use of child labor. 2. National Recovery Administration (NRA) a. Created under leadership of Hugh Johnson to enforce the law and generate public enthusiasm for the NIRA. b. The "blue eagle" was displayed by merchants adhering to NRA codes with the slogan "we do our part." c. Results: i. In the short run, business did improve -- Yet, unsuccessful in stabilizing small businesses ii. NRA eventually shot down by the Supreme Court in Schechter "sick chicken" decision. -- Congress had delegated legislative authority to the code-makers. iii. Criticized by some as favoring large firms as they were the ones making the codes. 3. Wagner Act (National Labor Relations Act of 1935) -- 2nd New Deal

a. A major milestone in the American labor movement b. Reasserted the right of labor to engage in self-organization and to bargain

collectively through representatives of its own choice c. Encouraged the creation of the CIO (Congress of Industrial

Organizations) started by John L. Lewis for unskilled labor. i. In 1936, CIO organized a sit-down strike in a GM factory in Flint, Michigan.

It became recognized as the sole negotiator for its workers. ii. Became independent of the AFL in 1938

-- Skilled-craft AFL refused upstart unions affiliated with CIO. 4. Fair Labor Standards Act (Wages and Hours Bill) -- 1938 (2nd New Deal)

a. Last of the New Deal legislation b. Established minimum-wage and a 40-hour week for industries involved

in interstate commerce. c. Labor for children under 16 forbidden; dangerous labor forbidden under

the age of 18. 5. Labor became a staunch ally of Roosevelt and the Democratic party. H. Tennessee Valley Authority (TVA) -- May, 1933 1. TVA was a public corporation under a 3-member board.

-- Proposed by FDR as the first major experiment in regional public planning. 2. Intended to reform the power monopoly of utility companies by building

hydroelectric power plants in the Tennessee valley while employing thousands. a. 20 dams build in an area of 40,000 sq. miles to stop flooding and soil

erosion, improve navigation, and generate hydroelectric power. b. Govt's Muscle Shoals property on the Tennessee River the nucleus of

the project. 3. Sought to establish fair rates by discovering how much the production and

distribution of electricity cost. 4. Huge success: provided full employment in the region, cheap electric power,

low-cost housing, abundant cheap nitrates, restoration of eroded soil, reforestation, improved navigation, and flood control. 5. Criticized by many as socialistic due to government control of public utilities and a planned regional economy. a. Fought unsuccessfully in the courts by private power companies. b. Congress refused other similar projects. I. Housing Reform 1. Federal Housing Administration (FHA) -- 1934 a. Stimulated the building industry by supplying small loans to householders

for improving their dwellings or completing new ones. b. One of the few "alphabetical agencies" to outlast the age of Roosevelt 2. United States Housing Authority (USHA) -- 1937 a. Lent money to states or communities for low-cost construction b. For first time in a century, slum areas in US stopped growing; even shrank. c. Criticized by real estate promoters, builders, and landlords ("slumlords")

as well as anti-New Dealers who considered it a waste of money. d. The project fell far short of its ambitious goal of 650,000 units. J. Social Security Act of 1935 (August, 1935) -- 2nd New Deal

1. One of the most complicated and far-reaching laws ever to pass Congress. a. Inspired by examples of highly industrialized European nations and pressure from the left (Coughlin, Townshend and Long). b. By 1939, over 45 million Americans were eligible c. First benefits, ranging from $10 to $85 per month, were paid in 1942.

2. Provided for federal-state unemployment insurance 3. Provided for old-age pensions for retired workers 4. Financed by a payroll tax on both employers and employees 5. Funded assistance for dependent mothers with children. 6. Provision also made for the blind, physically handicapped, delinquent

children, and other dependents. 7. Criticized by conservatives being built on a cult of leisure rather than work. K. Revenue Act of 1935 1. Raised income taxes on higher incomes, and also inheritance, large gift, and

capital gains taxes. 2. Reversed many of Andrew Mellon's tax cuts in the 1920s. L. Indian Reorganization Act of 1934 1. Bureau of Indian Affairs commissioner, John Collier, persuaded Congress to repeal

the Dawes Severalty Act of 1887. 2. New law restored tribal ownership of lands, recognized tribal constitutions and

government, and provided loans to tribes for economic development. -- Ended laws forbidding use of Indian ceremonies, dress, and languages. 3. Collier also secured creation of Indian Emergency Conservation Program, an Indian CCC for projects on the reservations. -- Helped Indians secure entry into WPA, NYA, and other programs. M. Effects of the First New Deal -- Economy improved bud did not get well between 1933 and 1935 a. GNP rose from $74.2 billion to $91.4 billion. b. Manufacturing salaries and wages increased about 50% with average weekly earnings going from $16.73 to $20.13. c. Farm income more than doubled. d. Money supply, as currency and demand deposits grew nearly 15%. e. Unemployment dropped from about 25% of nonfarm workers to about 20.1% (10.6 million). -- Still far short of 3.2% pre-depression 1929 unemployment rate.

V. Critics of the New Deal A. The American Liberty League 1. Group of wealthy Republicans and conservative Democrats (e.g. Al Smith and John W. Davis) formed in 1934 to fight "socialistic" New Deal schemes. 2. Sought to defend business interests and promote the open shop. 3. Unsuccessful in overthrowing FDR in 1936 elections. B. Father Charles Coughlin 1. Initially a New Deal supporter who eventually bitterly criticized it. -- Believed the NIRA and AAA benefited only industry and well-off farmers. 2. Had largest radio audience in U.S. history -- 40 million listeners 3. Called Roosevelt a liar for not nationalizing the nation's banks

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